Mediwound Ltd (MDWD) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MediWound 3Q 2014 Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct the question and answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to Anne Marie Fields from LHA. Ma'am, you may begin.

Thank you. Good afternoon. This is Anne Marie Fields with LHA. Thank you all for participating in today's call. Joining me from MediWound are Gal Cohen, Chief Executive Officer, and, Sharon Malka, Chief Financial Officer.

Following the close of the stock market today, MediWound announced financial results for the 3 and 9 months ended September 30, 2014. If you've not received this news release or if you'd like to be added to the Company's distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of MediWound. I encourage you to review the Company's filing to the Securities and Exchange Commission including without limitation the Company's Forms 24-F and 6-k, which identifies specific factors that may cause actual results or events to different materially from those described in the forward looking statements.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 5, 2014. MediWound undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

So with that said, I'd like to turn the call over to Gal Cohen. Gal?

Thank you, Anne Marie. Good afternoon to all listeners in the US and good evening to those joining us from Israel. Thank you all for your interest in MediWound and for participating in today's call.

We have made a considerable progress throughout the third quarter as we continue to execute our strategy end-to-end. In particular, we made a lot of headway with our commercial and clinical progress which I will highlight for you in today's call. First, let me review the Company's ongoing commercial progress with our lead product NexoBrid in Europe.

As many of you know, we introduced NexoBrid in Germany early this year with significant launch efforts beginning in the second quarter when we hired our own ground [field force]. Our quality calling points are the burn centers and the burn units in Germany, though we have completed the training of the leading clinical teams who treat patients with severe burns.

As we have noted before, the introduction of a new treatment paradigm takes time to integrate into the hospital's longstanding routing processes. We believe that NexoBrid will become the standard of care. However, as with any new therapy introduction, there are a few necessary steps to market adoption. These are awareness and interest, use, and advocacy. Let me review our initiative and progress in each of these three steps.

With regards to awareness, we made a significant progress in developing awareness and educating burn specialist and the clinical merits of NexoBrid to enhance and improve the ways severe burns are treated. In addition to calling on physicians at the major burn centers, we have been active at key regional and national medical conferences for burn specialists, where we showcase NexoBrid and highlighted its benefits in both the scientific and clinical session.

For example, in September, we significantly enhanced the visibility of NexoBrid at the National Burn Conference in Germany and in Poland. In October, we participated at the ISBI, the International Society for Burn Injuries Conference in Australia, where there were multiple oral and poster presentation, highlighting NexoBrid's effective, fast, selective, enzymatic eschar removal capabilities in the treatment of severe burns.

One of these poster sessions focused on the role of NexoBrid in the care of mass casualty burns, in the event of disasters. In addition, the Disaster Committee of the ISBI recommended the inclusion of NexoBrid as part of the draft plan for mass casualty events, as they see the role of NexoBrid in providing relief in the expected bottlenecks in hospitals during such disasters.

Moving forward, we are committed to being the [gold sponsor] of every European national and regional burn conference in 2015. For example, this week, we were the gold sponsor of the Israeli Burn Association Conference, which was our launch event in Israel, and we will be the gold sponsor of the Italian Burn Association Conference in Turin later this month. We are confident that the increasing awareness of NexoBrid generated at this venue will translate into further interest and use.

I say that at these venues already, resulted in considerable awareness, interest, and even enthusiasm for NexoBrid. As an example, during the conference in September in Germany, the local key opinion leaders conveyed their interest by convening an internal meeting to discuss the integration of NexoBrid into daily practice as part of their procedures. Following the meeting, we were approached by additional sites that had been sitting on the fence for quite some time and, now, have to start gaining experience in [views] of NexoBrid.

In addition to the conferences, we had a publication plan in place to promote our evidence-based approach in burn care. Such publication increase awareness and interest about the product in a wider circle.

Now let's see how this interest in NexoBrid is turning into the second step of use of the product. Specifically, we are very pleased with the advances in moving physicians along the axis from awareness and interest to use when you provide product and on-site training to burn specialists and their clinical teams. We are using a comprehensive NexoBrid training program that not only train the teams on NexoBrid itself, being relatively easy to use, but walks the team step-by-step to the entire process of integrating NexoBrid into their daily workflow. This presentation is interactive and enables the burn teams to interact with our burn experts on site and thinking together how to best implement NexoBrid at their specific site.

As we explained, centers usually start with one or two small cases and follow the patient for about a month until they're healed in order to gain hands-on experience and feel confident with the treatment before they continue to treat additional patients. What we are seeing is that increased usage increases confidence in the treatment, which in turn encourages the physicians to treat more patients and gradually, over time, they become site champions and even advocates.

This is why we are not trying to drive usage by initially providing some free-of-charge product. In fact, more patients were treated in Germany with NexoBrid in the last few months since our team was on ground than in the entire phase III study. As I said, increasing usage creates advocates, which is perfectly the third step that we will go over now.

In Germany, we already have a number of sites that advocate and part of the leading burn centers in Germany, and we are starting to see the order from these several sites. We are quite pleased to note that a number of German physicians presented data at the ISBI, sharing their experience and outcome using NexoBrid in oral and poster presentations.

Recommendations for using NexoBrid by leading burn specialists who use in their daily practices are strong endorsement and should generally enhance the product acceptance as the new SoC in the treatment of severe burns.

One of the centers that presented at the ISBI has already became what we call a center of excellence. This center of excellence welcomes physicians from other hospitals and countries who wish to gain more experience, hands-on experience in the use of NexoBrid, and just in the -- say for that, of Spanish physicians coming to a center in Berlin in order to see how to use the product with the experts on that site. The other center that presented in the ISBI used NexoBrid to treat about half of its incoming burn patients in the last few months.

We are very pleased with the progress our team has made with this introductory sale in Germany. We expect that over time that we'll build on the foundation they have laid to extend the use of NexoBrid from an innovative new treatment to the standard of care for treating severe burns.

Turning now to the extension into the rest of Europe. Our commercial activities in Europe are on track. We recently launched NexoBrid in the Nordic countries, in Austria, in the Slovak Republic, in Spain, and in Israel. We remain on our plan to launch in most of the European countries, to have success at France by the end of the year.

Our country business managers have nearly completed recruiting their local sales and marketing staff. They've met their markets. They are developing and implementing their local market access strategies and are in the process of training the burn centers and team in the major burn centers in their respective countries.

In parallel, we are implementing our market access plans across Europe. As you know, the European market access is a country-by-country process and we remain confident that we'll be able to demonstrate the clinical and cost-effective benefit of NexoBrid in treating severe burn patients.

Our cost-effectiveness can (inaudible) to generic sales at the hospital level in most countries without the need for the national level reimbursement. In some countries like in France that I mentioned before, we will need to wait for the review of our health economics technology this year before being allowed to commercially supply NexoBrid to hospitals. And currently, we plan to be in the provision to supply NexoBrid to the hospital in France, for example, in the second half of 2015.

To support and enhance the hospital-level market access effort, we have introduced our proprietary budget impact tool which demonstrates to the hospital administrator the positive economic impact that NexoBrid has on their institution. We believe that combined with our compelling clinical data, our budget impact tool will favorably influence the stakeholders at the hospital level to allow the inclusion of NexoBrid.

We also continue to advance our international commercial strategy. Earlier this year, we announced a distribution agreement in Latin America, in CIS and in Asia-Pacific, with the goal of making NexoBrid available to help severe burn victims worldwide. I can say that recently our partners in Argentina (inaudible) laboratory approval for NexoBrid. The approval process generally takes in Argentina about a year, and, thereafter, we expect to commercially launch the product.

In addition, we continue to have discussions with other potential distributors in other international markets and look forward to updating you when discussions turn into signed agreements.

Turning now to our clinical development program. In addition to expanding geographically, we are seeking to expand the NexoBrid label. As we just reported, we initiated our phase III pediatric investigation study to evaluate the efficacy and safety of NexoBrid as a treatment for severe burns in children. As you may know, NexoBrid is at [full force sell] in Europe and this study is in line with the European legislation for the approval of medicines used in children.

We are very pleased to be starting this pediatric study because early assessment of burn severity in children who frequently suffer from scalding liquid burns is even more challenging in delayed treatment. Also, treating children with a surgical standard of care is even more demanding than surgically treating others. So we believe that NexoBrid can play a major role in this indication as well.

We recorded already more than 110 children in past clinical studies and the effect of those treated with NexoBrid in terms of earlier eschar removal, reduction in surgical burden, and long-term cosmesis and function were even greater than in adults. Being able to spare these youngsters from surgery or even just to reduce the number or extent of surgical excisions and autografting is a highly motivating factor for all of us.

To recap, the pediatric study is a prospective, randomized, controlled, multicenter study that will compare NexoBrid with standard of care in approximately 160 children between the ages of 4 and 17 with severe burns. The study will be conducted at approximately 25 sites in Europe and in Israel. After we initiate the study and recruit 50 patients, a Data Safety Monitoring Board will be convened to evaluate the data and recommend whether to allow the inclusion of children between the ages of 0 to 3 years old as well into the study.

The primary endpoint of the study, evaluate the early escar removal, the surgical burden, cosmesis and function within a 24-month follow-up. Interim results with predefined stopping rules after a 12-month follow-up of all patients are expected to be available in the second half of 2017, at which point the study could already begin to be successful. After this full 24-month follow-up of all the patients, a final long-term result is -- the final long-term results are expected and we believe that they will be available in the second half of 2018.

Turning now to the initiation of our phase III program for NexoBrid in the US. As previously reported we submitted the clinical protocols to the IRBs, the Investigational Review Board and completed all the cooperation for the study to start.

We received a few minor questions from the IRBs regarding the study protocol and already responded. For example, IRB asked, why do we have a small gel placebo arm in the study if we already demonstrated in two phase II studies in the US that the placebo gel has no very serious effects and obviously no efficacy. We responded that this was an FDA request and we complied with what the FDA has requested.

Our responses are now back in the queue for the IRB review and we hope that the protocol will be approved shortly so that we can still start the study by yearend.

In the meantime, our US commercial strategy continues to evolve. We have established now a US market access advisory board which includes the leading burn specialist, as well as marketing and reimbursement experts. This board will be of great value as we set the strategy and plan for our US market access.

Looking beyond NexoBrid, our phase II clinical study of EscharEx for the treatment of chronic and hard-to-heal wounds is ongoing. EscharEx is based on the same technology as NexoBrid, so we believe that its development program is significantly de-risked. We base this belief on the wealth of clinical data as well as the preclinical toxicology and manufacture and control data that served in the approval process of NexoBrid. This allows us to focus on the clinical development of EscharEx to expedite time to market.

During the last quarter, we continue to open additional clinical sites in our phase II study for EscharEx, which should keep us on track to report top-line results from this trial by the end of 2015. We are looking forward to advancing EscharEx in this large and growing market with significant unmet medical needs. We are also about to begin a joint US-European market study to maximize the future adoption of EscharEx.

With that overview of our progress, let me turn the call over to Sharon Malka, our CFO, for the review of our financials. Sharon, please go ahead.

Thank you, Gal. Good afternoon, everyone. It's a pleasure to be reporting our third quarter financial result. We continue to fund and execute our commercial plans and our clinical program, being confident that our investments will drive the use and adoption of NexoBrid and advance our pipeline product.

Let me now turn to our financial results. Revenue for the first 9 months of 2014 was approximately $135,000, reflecting introductory sales of NexoBrid in Germany, and we are still early in the launch process, as Gal noted. Our efforts during the quarter remained focused on on-site training and hands-on experience in burn centers throughout Germany. Over time, we expect to drive revenue at these burn centers, convert from initial usage to confidence and reorder.

Operating expenses for the third quarter of 2014 were on plan, at $4.5 million, compared with $2.3 million in the same period of 2013. The increase was due to $1.2 million of commercial activities associated with building our European marketing infrastructure and executing our commercial launch program, and $0.9 million increase in noncash share-based compensation expenses.

Operating expenses for the first 9 months of 2014 were $13.3 million compared with $5.2 million for the first 9 months of 2013. The increase was primarily due to $3.6 million of commercial activities associated with building our European marketing infrastructure, additional $2.7 million increasing noncash stock-based compensation expenses, and about $1.5 million, one-time IPO-related expenses.

For the third quarter of 2014, we posted a net loss of $5 million or $0.24 per share. The net loss for the 9 months ended September 30, 2014 was $11.8 million or $0.61 per share. Our adjusted EBITDA for the third quarter of 2014 was a loss of $3.7 million compared with the loss of $2.1 million for the same quarter last year. Adjusted EBITDA for the first 9 months of 2014 was a loss of $10.3 million compared with the loss of $4.9 million for the same period last year.

Turning now to our balance sheet. As of September 30, 2014, we have $69 million in cash and cash equivalents and our working capital totaled $70.1 million. We remain on track with regards to cash used and company used, about $12 million in cash during the first 9 months of 2014 to fund ongoing operating activities.

As we've discussed, we will continue to invest in our marketing infrastructure and to advance commercial launches across Europe. We will also fund further clinical development of NexoBrid and EscharEx.

With that financial overview, let me turn the call back to Gal. Gal, please.

Thanks for that overview, Sharon. In conclusion, we remain focused on executing our strategy and have made significant progress towards our goal. We will continue to expand our commercial efforts throughout Europe and to advance our clinical development programs.

We have substantial market opportunities ahead of us both in severe burns and in chronic wounds, and we are eager to achieve several milestones during the fourth quarter and look forward to reporting to you on our next call.

And now, operator, please open the call for questions.

While we're waiting for our first question, I would like to note that Sharon and Gal will be participating in the upcoming Credit Suisse Healthcare Conference taking place next week from November 10 through the 12 in Phoenix, Arizona. The following week, they'll be addressing investors at the Jefferies Global Healthcare Conference which is taking place November 19 and 20 in London.

For those of you attending either of these conferences and who would like to meet with the team, please reach out to your respective Credit Suisse or Jefferies representative, or you can always contact me, Anne Marie Fields at LHA at 212-838-3777.

And operator, we're ready for the first question.

Thank you. (Operator Instructions)

And our first question comes from the line of Bruce Nudell of Credit Suisse. Your line is now open.

This is Matt in for Bruce. Thanks for taking the question. First I was wondering if you'd give us any color around how many centers you're in Germany today using NexoBrid and how that compares to where -- or maybe a quarter ago.

I think that particularly we trained the vast majority of the other centers in Germany which amounts to about 17. And what we see in the last quarter is the center getting trained, but really were sitting on the fence and not starting to treat patients, are now gradually starting to dip their hands into the water and start treating patients as well.

So maybe 17 in the quarter and you've kind of trained all the centers in Germany to date?

We have trained all the centers that can treat others in Germany.

Okay. And then how many cases -- those physicians that you saw, you mentioned several scenery orders, how many cases or how long did it take before those translated into reorders?

I think it takes -- certainly it depends on centers -- the center from a champion to a champion, but what we saw in advancing treatment, 5 to 10 patients, they feel confident enough to -- and go from experimental use or from testing technology to reordering and treating patients. And as I mentioned, even one center in Germany particularly half of its patients so far, which we find as very encouraging.

Okay, perfect. And I just want to follow up and then I'll drop. When you see docs who are converting, is that really efficacy-based? Is it a result of the economic argument that you're making? Or what's driving that?

I think it's particularly efficacy. I mean, the (inaudible) of NexoBrid is particularly the ability to remove the eschar early without harming vital tissues and to allow the physician to just bind the wound there and not guess how to go about and treat the patient. I think physicians realize that.

The main challenges that they are facing in the beginning are not so much with the use of NexoBrid itself. I mean they know how to use it, it's not so difficult, and it works. So they see that it removes the eschar. It's now about how to assimilate it, to integrate it into their routine use, because they have been practicing surgical debridement for the last 25 to 40 years and all the settings are aligned around that, the nursing staff, the anesthesiologist, the routine of the department, and it takes them time, especially in Germany, that's like really to follow the protocols to integrate and understand how to best use the product in their daily routine.

The economic element, I think, is more -- it's something that you need to make sure that it's not a showstopper, rather than an incentive to use the product. So the incentive is clinical and the economical benefits are something to alleviate any concerns of the administration of the hospital regarding the integration of the product into the use of this center.

Okay, thanks for taking the question.

Thank you. And the next question comes from the line of David Maris of BMO Capital Markets. Your line is now open.

Good evening. Just one question on the uptake. And we had spoken just a week or so ago, so it's not that much of a surprise that the sampling program or the trial program has taken kind of a more aggressive stance of getting physicians to try the product. But maybe you could just give us a little -- is it taking longer to convert over physicians from a trial to actual users? And is that in part due to they're starting off with smaller burns than you had originally expected or is it getting procedures in the hospital set so that physicians and other caregivers know what to be doing if they do decide to use NexoBrid? Maybe just talk a little bit about how the trial processes changed from your expectations from a year ago.

Thank you for the question. I think that first of all, evaluation is a process going from awareness to interest, from use to, later on, advocacy hopefully, and we see a lot of awareness in Germany. I don't think that we'd find a burn center in Germany that didn't hear about NexoBrid or interested in knowing more about it.

And once they go into the training program and they get this interest, they start experimenting the product. As we mentioned, we provided with three products for them to experiment because we believe and we see this from our in-market surveys that the more they use the product, the more confident they gain, the more they feel comfortable to integrate the product and start using it.

What we see, as we mentioned, is that unlike in a clinical study that you have excluding criteria that you said that you need to treat the patient between X and Y, in real life, physicians tend to start with a smaller patient because they want to get comfortable with it and they are not working within the framework of protocol. So they have to create their own protocol and not only (inaudible) for the product itself.

Just as we mentioned, the integration of the treatment into their routine daily practice and they usually start with a small burn, let's say, a hand, initially. Clinical advantages of NexoBrid are clear. And they debride the hand, they see after possibly on the first day that it works, then they want to follow the patients for a couple of weeks until the wound heals and they discharge the patient. Only then they are speaking and looking for the second patient to try the product.

And after they do it with a couple of products -- a couple of patients, then additional physicians within the department are increasing their interest and ultimately try it as well with their patients. During this process where they're treating the department 5 to 10 patients, the department itself starts to learn what do we need to prepare, who needs to do what, when, what is the role of the nurse. I'm not talking about the debridement itself. Debridement is easy, I mean, just apply the product for four hours, you remove it and that's it. But all the screens that are around it, because this center has been used for the last 25 or 40 years to do surgical debridement, they have the procedures for that.

So I think this is the product that we see. The more that we can drive the news, the more that we can drive the experience in the center, the more that we can then convert from users to order and to reorder. So this is why we extend this training program, this is why we provide free products, in order to move them along this axis as fast as we can.

We don't want to push them too hard because physicians, in general, don't like for me, like, to shove it down their throat. They want to feel comfortable and it's very important for us to put an infrastructure in place so that the long-term use of NexoBrid really becomes the standard of care. So this is the process that we see now in Germany.

By the way, it's not only in Germany. We also see that now in the Nordic countries. We see in the Nordic countries the way that we train in the center. We see in the Nordic countries center already reordering NexoBrid and we hopefully will see now this process going on also in Austria, in the Slovak Republic, in Spain, in Israel, which obviously is a different situation from the centers that have more experience already.

And in the next quarter, as I mentioned, we would like to extend that to particularly most of the European countries except for maybe France and one other.

Okay, thank you.

Thank you. And our next question comes from the line of Akiva Felt of Oppenheimer. Your line is now open.

Hi, thanks. I just had first a follow-up to David's initial question. If you take the usage that you saw in Germany through the sampling program, if you had been charging commercial price, what would that equate to in terms of revenues?

I think in general what we see -- I'm a little bit hesitant to answer just because of forward-looking and really projections which we believe that it's not the right thing to do during the launch phase, but if we just talk about evidences already -- or product that is already available, we say that in Germany, more patients have been treated than the entire phase III study.

We had in the phase III study included approximately 180 patients and had two arm studies. So using mathematics, and you end up with how many patients have been treated. We also said that in general we believe that an average burn patient has about a 10% TBSA. However, through the experimental stage or understand that they are starting to use the product, they usually start with smaller burns. So I would expect the TBSA on average at the beginning to be a bit lower than 10 percent. And we know that we are currently charging in Europe approximately, if I (inaudible) to a dollar, a $450 of sale 1% TBSA.

So all the information is there and one can do mathematics and get it, a very good understanding of how to address the question that you just mentioned.

Okay. No, no, that's helpful. And I'm sorry to put you on the spot with the question. But would you say that the traction, whether it'd be through sampling or the other programs, has been in line or ahead of your expectations? I mean, it sounds like you guys are pretty happy with how things are going in Europe so far.

I think that we see a lot of tractions, we see a lot of interests, we see a lot of [improvements] in Germany. I mean, practically, our sales force started to be on ground in the second quarter, taking into account that in Europe, July and August, it's not a time for launch and production because all the centers are working (inaudible) capacity because of the vacation and they don't tend to -- they treat patients obviously, but they don't like to start and treat in June this time, where half of the staff is not on board.

We believe that we will be able to gain a lot of fair and interesting news. We have to (inaudible). Their current standard of care has been there since the '70s. So we believe that gaining such interest, getting with so many centers to start treating with the new product, seeing some centers going from total unawareness to awareness interest, use and even advocacy, seeing two physicians from Germany, going to Australia to report their real-life usage of the product, having one center already as a center of excellence, inviting people from other countries and other centers in Germany to spend time at the center to experience use of NexoBrid, seeing a center in Germany that practically in a couple of months treated half of it patients with NexoBrid.

So overall, we do -- we are quite happy with what we see, as well as with the expansion to additional countries in a very short time, been able to advance the availability of the product to particularly, I would say, almost half Europe and we hope to complete this process in the next quarter. What we also see and this is also not coming as a surprise to us and we had communicated very clearly during the IPO and after the IPO.

We do not believe that NexoBrid will become standard of care within a year or two. We do believe that NexoBrid will be the standard of care, because in our mind, clearly, it is a better mousetrap. It just does -- the eschar removal is better than anything that exists in the market, but it's not going to happen in the day. And the main reasons are not -- are aligned or around what I mentioned before. How that the center change the way it works, not around the debridement, around the entire handling of the patient what the [medical staff] needs to do, what their anesthesiologist needs to do, what their physician needs to do, and think like that, which takes a little bit of time. It takes obviously a little bit of time until they gain confidence in the treatment of the entire patient, not just at the debridement stage.

And we also have to convince going forward. I'm not talking about the first patient or two, the administration around the burn center that this is also cost-effective for the institution. So all this process has to be done in parallel. And in addition to that, there are all kinds of small administrative things that have to do -- that we have to do and it depends on the countries sometimes to put on the formulary, sometimes they need to get a special (inaudible) in Italy and things like that can take a little of time, a couple of months, until we can particularly supply the product to the hospital.

So we are addressing all these small things, but overall, I think that we are very happy with what we've seen in the market.

Okay, thanks so much for the update.

Thank you. And I'm showing no further questions at this time. I would like to turn the call back over to Gal Cohen for any closing remarks.

Thank you very much. So first of all, thank you for your questions and for your interest in MediWound. We look forward to updating you again when we report our fourth quarter and full-year 2014 result in early 2015.

Thank you very much, and have a good evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day, everyone.